Waleed Tariq Academy homeNEC4 Payment and Defined Cost Masterclass · Why Option C is not cost-plus
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NEC4 Payment and Defined Cost Masterclass · Module 1 · Lesson 4 of 4

Why Option C is not cost-plus

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Why it matters

Why does Merrow Vale's GBP 136,000 share wait for the end of the job?

The target decides the final bill.

GBP 8,912,000the final target, the
GBP 8,640,000the final
GBP 136,000the share of Merrow Vale, the Contractor

Source: ECC Option C 54.1, 54.2. Aldermere Contract Data.

The rule

At the end the saving or overrun is split through the share ranges

Merrow Vale's share in each .

“The difference is divided into increments falling within each of the share ranges” (54.1)

25%Under 90%

of the saving

50%90% to 110%

of each pound saved or overspent

25%Over 110%

of the overrun

Source: ECC Option C 54.1 to 54.4. Aldermere Contract Data.

The rule

A late notice keeps the cost paid but freezes the target

Events caused by the Project Manager or the Supervisor sit outside the bar.

“within eight weeks of becoming aware that the event has happened” (61.3)

In time

The , a and can move.

Late

None can move, but the cost is paid.

Source: ECC 61.3. ECC Option C 11.2(31), 54.1.

See it on the project

Without the CE007 notice, Merrow Vale would have lost GBP 68,600

One notice on 6 March 2026 protected GBP 40,600 of share and GBP 28,000 of .

Aldermere's final assessment, with and without the CE007 notice, GBP

ShareCE007 notified
GBP 136,000
ShareNever notified
GBP 95,400
Delay damagesCE007 notified
GBP 4,000
Delay damagesNever notified
GBP 32,000
075,000150,000
CE007 notified on 6 March 2026Suppose it was never notified

Without CE007 the target is GBP 81,200 lower and Completion is eight days late.

Source: ECC 61.3, X7.1. ECC Option C 54.1, 54.2. Aldermere Contract Data.

See it on the project

Notify each event separately (13.7), inside eight weeks

Change the date. The eight weeks run from awareness.

What to writeCompensation event notice

To: Dana Whitfield, Project Manager

From: [your name], Merrow Vale

Date: 6 March 2026

Event: (60.1(12)).

Found 3 March 2026: old foundations in the Station Road culvert trench.

In the Toolkit: Letter 02

  1. Last day to notify…eight weeks after Merrow Vale became aware

Source: ECC 13.7, 60.1(12), 61.3.

Quick check · The target

Two questions on what you have just covered

Two situations.

Quick checkPick an answer to see if you are right and why
1Suppose the Price for Work Done to Date passed the target in March 2027. What would Dana do?
Stops paying until the final assessment
Keeps paying Defined Cost plus
Pays only half of each cost from then on
2Suppose Dana's instruction caused a compensation event, and Merrow Vale notified it ten weeks later. Can the Prices change?
No, because the eight weeks have now passed
Yes, an instruction is outside the bar
Only if Dana agrees to the delay

2 questions to answer

Source: ECC Option C 11.2(31), 54.3, 54.4. ECC 61.3.

Recap

Protect the target as hard as you protect the payment

That completes the lessons. Next, the module check.

On Monday at work

  • Notify every compensation event inside eight weeks, paid or not.
  • Track the Price for Work Done to Date against the target every month.
  • Check for a Z clause that caps payment at the target.

In the Toolkit: NEC4 ECC Notice Letters (zip) Members

Next: the module check

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Independent course material. It is not published or endorsed by NEC. Clause references are to the NEC4 Engineering and Construction Contract, June 2017 with amendments January 2023. The project and the people are invented. Short quotes from NEC4 (© NEC 2017) and the FIDIC Red Book (© FIDIC 2017) are used for review and comment. Read the full clauses in your own copy of the contract.

Source: ECC 61.3. ECC Option C 54.1.

Go deeper (optional)

Payment runs on above the target unless a Z clause stops it

Two points for later. Skip them if you are short of time.

Is interim payment capped at the target?

Not in unamended NEC4. In Doosan Enpure Ltd v Interserve Construction Ltd (2019), on an NEC3 Option C contract, the court held that the share is settled after completion, not in interim payments.

Option C 54.1, 54.3

Can a Client change that?

Yes, with a . Some Clients cap payment at the target or hold back part of a forecast overrun. Aldermere has no Option Z.

Option Z

Source: ECC Option C 54.1, 54.3. Option Z. Doosan Enpure v Interserve (2019).

Go deeper (optional)

Payment rules sit in five places

A map for later modules.

What do the core clauses hold?

Clauses 50 to 53: the , certificates and payment, and the final assessment.

What does the main Option add?

Options C to F: forecasts (20.4), finalised Defined Cost (50.9), records and inspection (52.2 to 52.4). Options C and D: the share (54).

Options C to F. Share: C and D

Where do secondary Options fit?

Only if chosen. Aldermere has X7 delay damages and X16 retention. X1 goes with A to D only, X3 with A and B only, and X16 never with F.

Schedule of Options

What does the Contract Data set?

The assessment interval, the interest rate, the fee percentage and the share ranges.

Contract Data

What does the Scope add?

The form of the application, extra records and procurement procedures.

Scope

Source: ECC 50 to 53. ECC Options C to F 20.4, 50.9, 52.4. ECC Option C 54.1 to 54.4. Schedule of Options. Contract Data.